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WASHINGTON / BRUSSELS (Reuters) – World financial leaders said on Tuesday that the global economy had escaped a collapse caused by the coronavirus so far, but warned not to conquer the pandemic, maintain stimulus and address mounting debt between nations. poor could crush a fragile recovery.
At the start of the annual meetings of the International Monetary Fund and the World Bank, the IMF issued slightly improved growth forecasts driven by unexpectedly stronger rebounds from coronavirus lockdowns in wealthier countries and China.
The IMF said it now expected global gross domestic product to contract 4.4% in 2020, compared with the 5.2% contraction it predicted in June, when business closings were at their peak. Some $ 12 trillion in stimulus provided largely by advanced economies limited the damage, but poor countries and other emerging market economies faced a worsening outlook, the global lender said.
“The story is less dire than we thought three months ago, but still,” IMF Managing Director Kristalina Georgieva said during a virtual roundtable.
Georgieva said that governments should stay focused on their health care responses to the coronavirus and should not withdraw the stimulus prematurely.
“If we cut these lifelines that have been extended to families and businesses before we get out of the health crisis, this could be catastrophic in terms of bankruptcies, unemployment and undo everything that has been done so far,” he added.
Underscoring concerns that it could take longer to develop promised treatments for the virus, US drug companies Eli Lilly and Johnson & Johnson said they were pausing clinical trials of an antibody treatment and a vaccine, respectively, over safety concerns. .
The Group of 20 major economies, in a preliminary statement seen by Reuters, said the outlook was “less negative” due to the positive impacts of actions already taken, but that the recovery will be “uneven, highly uncertain and subject to a high downside risk. ” “
“We will maintain and strengthen as necessary our political response, considering the different stages of the crisis, to ensure a stable and sustainable recovery,” the G20 finance ministers and central bank governors said in the draft before a meeting on Wednesday.
DEBT FREEZE EXTENDED
The draft also said the G20 will agree to extend a freeze on poor countries’ official bilateral debt service for another six months beyond the end of this year.
That’s well below the one-year extension requested by the IMF, World Bank and many emerging market nations, but the G20 agreed to review the debt situation in April to determine if another six-month extension would be warranted.
The freeze is intended to free up billions of dollars that poor countries can divert to their pandemic health and economic responses.
Some emerging market leaders said more needed to be done to avoid defaults in fragile economies from Africa to Latin America.
Kenneth Ofori-Atta, Ghana’s finance minister and chair of the Group of 24 developing countries, said greater involvement is required from private sector creditors, who have thus far avoided debt suspensions, for efforts that include restructurings. of emerging market debt.
“It will take a very synchronized and coordinated effort from all parties so that we do not enter a world of cascading defaults,” Ofori-Atta told a G24 press conference. “I think all of this could be avoided if we could start real and honest discussions about the cash flow capacity of all these countries.”
Information from David Lawder and Andrea Shalal in Washington, Jan Strupczewski in Brussels, Leigh Thomas in Paris and Tom Arnold in London; Written by David Lawder; Editing by Paul Simao
